Renewable Tax Credit Expiration Could Set Back Industry

11/30/12 7:34AM By John Dillon
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Tax credits that are seen as vital for the renewable energy industry are set to expire at the end of the year.

Vermont's congressional delegation supports extending the credits. But the legislation is tied up in high-level budget and revenue negotiations now underway between Congress and the White House.

The production tax credit allows renewable energy developers to reduce their tax bills once the projects produce electricity. It's currently set at 2.2 cents per kilowatt hour, and it can bring substantial savings to utilities and their customers.

In Green Mountain Power's case, the tax credits for its recently completed Lowell wind project are worth roughly $40 million.

Congressman Peter Welch is a strong supporter of the credits. Earlier this year, Welch made the home-state economic argument before the House Ways and Means Committee.

"We've got a great company, one of them called NRG Systems in Hinesburg, provides wind developers, utilities and turbine manufacturers with the tools needed to measure wind," Welch told the panel. "And because of the uncertainty with the PTCs - and uncertainty obviously concerns all of us - they report about 50 percent drop in U.S. orders compared with last year."

In an interview, Welch says he's not involved in the high-level negotiations between Congress and the White House on the so-called fiscal cliff. The talks are focused on averting automatic budget cuts and tax hikes scheduled to kick in at the end of the year. Welch says the energy credits are in play - along with many other tax provisions - but are not a central part of the discussions.

Last year, the government distributed about $5 billion worth of tax credits to energy developers Welch believes the credits are worth the cost to the federal treasury.

"There's two issues. We need a national energy policy that moves towards clean energy. And obviously things like wind and solar, geothermal, biomass all can be part of a clean energy portfolio," he says. "Secondly, there's real opportunity in creating jobs if we move aggressively into standing up a clean energy economy." 

But the credits are controversial, since they also add another economic incentive for ridgeline wind projects. Annette Smith of Vermonters for a Clean Environment hopes Congress rejects the extension.

"Unless they put some conditions on them for instance to assure they are built in places that they should be built rather than subsidizing environmental destruction... they're really doing a disservice to the people of Vermont," she says.

Gabrielle Stebbins, the executive director of Renewable Energy Vermont, represents wind and other renewable companies. She's pushing the other side of the issue.

"Our message is this is very, very critical for long-term business development in Vermont but also throughout the nation," she says.

Renewable energy advocates say historically the industry has suffered a setback -including project cancellations - in the years when the credits were not renewed. And that's exactly what wind opponents in Vermont would like to see.

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